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SCOs NASDAQ Woes No Surprise to Open-Source World

The feeling among LinuxWorld attendees is that SCO's business ways have finally caught up with the beleaguered Unix and intellectual property company.

BOSTON—The news that The SCO Group Inc. is facing the possibility of being delisted by the NASDAQ stock market did not come as a surprise to attendees of LinuxWorld here.

NASDAQ warned SCO on Wednesday that the company was in danger of being delisted from the NASDAQ SmallCap Market stock market because it has first failed to file its 2004 annual report 10-K to the Security and Exchange Commission by its deadline, and then failed again to file the required document by its extended deadline of Jan. 31.

Two weeks later SCO still hadnt filed the reports, so NASDAQ notified SCO that it would be delisted shortly unless it could show cause for why its reports were late.

Fredrick Berenstein, chairman and chief technology officer of Xandros, a Linux desktop distributor, for one, said he wasnt "the least bit" surprised.

"SCOs plunging revenue showed the fragility of the way theyve been operating," Berenstein said.

"Ive said from the first that the case [SCO vs. IBM over Unix/Linux copyright and contract issues] was going to crash and burn," he said. "Their business plan based on IP [intellectual property] lawsuits was just not going to work."

Some saw SCOs SEC woes as being unavoidable. "It was inevitable because of the position they took with Linux," said Mike Sheffey, CEO of Versora, an integrator and ISV that specializes in Windows-to-Linux migration.

"After becoming a penny stock, theyll become a company that has lost all its pennies," said Sheffey. "Their customers are already fleeing to Linux."

Jason Filby, project coordinator of ReactOS, an open-source effort to create a Windows operating system clone, also was not surprised by the news.

"Given their past actions, it was only to be expected that theyd be so disorganized that they would fail to get their financial reports in order," said Filby.

Others saw SCOs declining revenues as the real reason why its financial reporting has become almost terminally late.

In its last quarter of 2004, which ended Oct. 31, SCO lost more than $6.5 million. On a per-share basis of 37 cents per share, that was more than twice as much as Dion Cornett, a financial analyst with Decatur Jones Equity Partners, had predicted it would lose.

"SCO hasnt had traction for four to six months. They hadnt been able to go anywhere with their cases; their other financial news had been all negative," said Lincoln Durey, president of EmperorLinux Inc., a Linux laptop system integrator.

In addition, "Now, more and more lay people are seeing that SCOs IP claims are baseless. Lay people are realizing that there is no there, there with SCO," Durey said.